How To Deduct School Expenses
Make your education pay by knowing how to deduct school expenses on your federal tax return. You can increase the size of your refund if you know what and how much you are able to deduct from your income each year. If you are not in school but have dependents who are, you can also deduct the cost of their education from your taxes.
- Determine which credit you are eligible for. As of 2009, there are three credits available to those who paid education expenses. You can only choose claim one credit, though. The Hope Credit is only available to students in their first two years of college and the American Opportunity Credit is only available to undergraduate students during their first four years, but the Lifetime Learning Credit is available for any one enrolled at a post-secondary school.
- Look for Form 1098-T Tuition Statement in the mail. Your school should sent you form 1098-T, which lists how much you paid for tuition in the previous year as well as any scholarships you received, which you cannot deduct from your income.
- Download Form 8863 from the Internal Revenue Service's website.
- Fill out the form, filling in the appropriate information based on which credit you are claiming. For the American Opportunity credit, enter the amount of qualified expenses you had for each student, then subtract $2,000. Multiply the difference by .25 and record that number on the form.
- Claim the Hope credit by entering your expenses (not more than $2,400) in the appropriate spot on the form. In the next column, write $1,200 or the amount of your expenses again, if it is less than $1,200. Add the two columns together and divide by half, then enter the number on Form 8863.
- To claim the Lifetime Learning Credit, add up all your educational expenses and record them on Form 8863. If the total is more than $10,000, write $10,000 on your form.
- Enter the credit amount from Form 8863 into your 1040 tax form.